In 1959, Mississippi native Roe Erister "Rick" Hall and Billy Sherrill, a saxophone player from Phil Campbell, Franklin County, joined with Tom Stafford, who managed two Florence movie theaters, to open FAME Recording Studios over City Drug, a store Stafford's father owned in downtown Florence. Sherrill was the son of a Baptist preacher and had spent much of his childhood traveling around northwest Alabama, playing music while his father preached. Hall was born in Tishomingo County, Mississippi, in 1932 but spent much of his poverty-stricken childhood in the Freedom Hills area of Franklin County. Despite a challenging childhood, Hall's life was always full of music, as his father sang in gospel quartets and taught singing in schools. Sherrill and Hall became friends while playing with country bands and began to write music together, including "Sweet and Innocent," which was recorded by Roy Orbison. Stafford, who saw a picture in the newspaper of Sherrill and Hall holding up the Roy Orbison record, contacted the two men and asked them to form a partnership with him.

The partnership between Hall, Sherrill, and Stafford lasted briefly, ending in 1960. Stafford and Sherrill kept the studio space, the equipment, and the songwriters but left Hall with the studio name. Sherrill soon moved to Nashville, Tennessee, where he would have a distinguished career writing and producing music. Stafford remained in Florence, running Spar Music, a publishing company. Hall partnered with his future father-in-law, Hansel Cross, a used-car dealer with a musical background, to move the studio across the Tennessee River to a former candy and tobacco warehouse in Muscle Shoals. Hall would eventually buy out Cross to become the sole owner of FAME. In the new studio space, Hall wrote both radio jingles and songs, some of which were recorded by stars George Jones and Roy Orbison. Hall also created his first major hit record in this studio, with local rhythm and blues (R&B) singer Arthur Alexander's "You Better Move On," which reached the number 24 slot on the Billboard Hot 100 chart. The group of musicians Hall brought in to record the song included Norbert Putnam (bass), Terry Thompson (guitar), David Briggs (piano), Earl, "Peanutt" Montgomery (guitar), and Jerry Carrigan on drums, all of whom became FAME Studio's first rhythm section.

Hall used the money he earned from "You Better Move On" as a down payment on a loan to build a better-equipped studio. He purchased property on Avalon Avenue in Muscle Shoals, which at the time was on the outskirts of town, and asked Nashville producer Owen Bradley to design the studio. It was a 20 x 70-foot concrete-block building that featured just one recording studio, now known as Studio A. Bradley incorporated echo chambers in the studio design that helped to create the rich sound the studio became well known for. The first hit Hall recorded in the new studio was Jimmy Hughes's "Steal Away" in 1963.

In 1964, the members of the original FAME rhythm section left to pursue careers in Nashville, and Hall replaced them with Jimmy Johnson (guitar), Roger Hawkins (drums), Barry Beckett (keyboards), and David Hood (bass). This group of musicians would become known as the "Swampers." Given the nickname by pianist Leon Russell, the moniker was made famous by the group Lynyrd Skynyrd in their 1974 hit "Sweet Home Alabama." Often joined by other musicians in the studio. Hall and the Swampers worked together to create the Muscle Shoals sound, which Hall described once as "funky, hard, gutty, down to earth." In 1967, Hall constructed an addition that included a lobby, office, and a second recording studio (known as Studio B) and doubled the size of the building.

The rich southern soul sound coming out of FAME helped draw a number of significant African American artists into the studio, many of whom were brought to Alabama by Jerry Wexler of Atlantic Records. Indeed, the collaborations between black musicians and songwriters and the white session men were notable at a time when Alabama, and much of the Deep South, was emerging from violence and social upheavals of the civil rights movement. Autauga County native Wilson Pickett recorded "Land of a Thousand Dances," "Funky Broadway," and "Mustang Sally" at FAME, all of which spent time on the Billboard Hot 100 chart. Other Atlantic Records artists, including Otis Redding, Clyde McPhatter, and Arthur Conley, followed Pickett and also found success recording with Hall and the Swampers. Wexler also brought in Aretha Franklin to record at FAME, but the recording session was cut short because of an argument between Hall and Franklin's husband Ted White. Franklin managed to record much of her first breakthrough hit, "I Never Loved a Man (the Way that I loved You)" before she left for New York. The Swampers traveled north to finish the record, which included the international hit "Respect." They went on to record other hits with Franklin, including "Call Me" and "The Weight." Hall's relationship with Chess Records led to him record Etta James at FAME, including the hit "I'd Rather Go Blind" in 1967 and her 1968 "Tell Mama" single, which was a response to Atlantic Record's artist and Montgomery County native Clarence Carter's 1966 "Tell Daddy." Carter also recorded at FAME, including major hits "Slip Away," "Too Weak to Fight," "Patches," as well as many other songs, with Hall.

Significant changes came to FAME Studios in 1969. Guitarist Duane Allman had arrived at the studio in the fall of 1968 and found a place as a full-time session musician there for his admirable work on Wilson Pickett's cover of "Hey Jude." But he left in 1969 to form the Allman Brothers Band with his brother Greg, and more importantly, the Swampers also left FAME. Backed by Jerry Wexler and Atlantic Records, the Swampers opened their own studio, the Muscle Shoals Sound Studio at 3614 Jackson Highway, just a few miles down the road from FAME. When the Swampers left, Hall was in the process of signing a $1 million contract with Capitol Records and had to put together a new rhythm section immediately. The new group, known as the FAME Gang, included Albert "Junior" Lowe (bass guitar), Jesse Boyce (bass guitar), Freeman Brown (drums), and Clayton Ivey (keyboards). In the midst of all of these changes in 1969, Hall still managed to produce hit record after hit record, including Candi Staton's "I'd Rather Be an Old Man's Sweetheart" and Bobby Gentry's "Fancy," both of which spent time on Billboard's Hot 100.

As Hall shifted away from R&B and towards pop and country in the early 1970s, he and FAME Studios continued to find success. In 1970, Hall began recording the Osmond Brothers band, assisting in the production of their first hit record with "One Bad Apple" which spent five weeks at number one on the Billboard Hot 100 chart. In 1971, Billboard named Hall "World Producer of the Year," his productions making up almost 2.5 percent of all record sales in the United States. These successes led Hall to form a close relationship with United Artists that lasted until 1977. In 1972, the exterior of the building underwent another major renovation, resulting in the building's current appearance. Other notable artists who recorded at the studio during this era include Paul Anka, Billy Ocean, the Righteous Brothers, Conway Twitty, Wayne Newton, and George Jones and Tammy Wynette. Hall experienced health problems in 1977 that forced him to step away from the studio, and he spent the next two years working on his family farm. When he returned to the studio, he found considerable success producing country music by Mac Davis, Jerry Reed, and local band Shenandoah. In 1989, Hall sold FAME's original publishing company and copyrights on recordings, including "Do Right Woman, Do Right Man," "Tell Mama," and "Slip Away," to EMI Music Publishing. Hall quickly built a new catalog, which included such hits as John Michael Montgomery and All-4-One's hit "I Swear" and Tim McGraw's "I Like It, I Love It."

By the late 1990s, the city of Muscle Shoals had grown dramatically. The studio, which once sat on the outskirts of the city on a semi-rural road, now sat in the midst of a busy commercial district. Worried about the widening of Avalon Avenue and the impact new development would have on the studio, the Alabama Historical Commission placed FAME on the Alabama Register of Landmarks and Heritage in 1997.

FAME Studios still produces hit records and the studio remains a recording destination for artists including Alicia Keys, Jason Isbell, Band of Horses, Phish, Willie Nelson, and many others. The publishing company writers continue to pen hit songs, contributing tracks on albums by the Dixie Chicks, Rascal Flatts, the Zac Brown Band, and Jason Aldean. The 2013 documentary film Muscle Shoals helped to bring a great deal of recognition to the musical history of the Shoals region, as did Rick Hall's 2014 Trustee Award from the National Academy of Recording Arts and Sciences.